Es­ports Gam­bling and Aus­tralian Law

Pa­trick Lum is will­ing to bet you'll find this in­ter­est­ing

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In­de­pen­dent Sen­a­tor Nick Xenophon made mi­nor waves in the gam­ing world a few months ago when he promised to in­tro­duce leg­is­la­tion sin­gling out Valve’s pop­u­lar es­ports ti­tles Counter-Strike: Global Of­fen­sive and DOTA 2. But why are videogames in Sen­a­tor Xenophon’s crosshairs? The an­swer, as you might ex­pect, is gam­bling.

“This is the Wild West of gam­bling that is ac­tu­ally tar­get­ing kids,” he told Fair­fax Me­dia back in July. “In­stead of shoot­ing avatars, par­ents soon find [their kids] have shot huge holes through their bank ac­counts.”

Sen­a­tor Xenophon, a fierce antigam­bling ad­vo­cate, usu­ally re­stricts his tar­gets to pok­ies and sports bet­ting. But the world of videogames and es­ports has at­tracted much at­ten­tion from book­mak­ers and gam­bling reg­u­la­tors alike in re­cent years due to its un­prece­dented growth, with the scene reach­ing an es­ti­mated to­tal value of US$1.1 bil­lion in 2019 ac­cord­ing to mar­ket re­searcher New­zoo.

This growth has also fu­elled an ex­ten­sive net­work of com­pa­nies and web­sites that pro­vide gam­bling

ser­vices aimed at the es­ports au­di­ence – as well as a num­ber of scan­dals re­volv­ing around cor­rup­tion, match-fix­ing, and un­der­age gam­bling. Yet the scene re­mains al­most wholly un­reg­u­lated world­wide, with gov­ern­ments mov­ing slowly to bring ar­chaic leg­is­la­tion in-line with this sud­den and ut­terly baf­fling mar­ket.

DRAW

Dis­cus­sion and news ar­ti­cles about es­ports gam­bling, wa­ger­ing and bet­ting of­ten con­flates and con­fuses the var­i­ous types of gam­bling ac­tiv­i­ties that are tak­ing place in con­nec­tion to es­ports. There are three pri­mary types:

- Wa­ger­ing is a fa­mil­iar model, treat­ing es­ports as events to place bets on; third-party book­ies take bets on the out­come of matches and pun­ters can cash out if they win. The ma­jor dif­fer­ence in gam­ing is that bets can also take the form of vir­tual items as well as cash, most com­monly (in CS: GO at least) gun skins.

- Vir­tual Casi­nos are not strictly es­ports re­lated, but have be­come so in re­cent years. As above, in-game items such as skins are of­ten used as gam­bling to­kens on third-party sites to play games of (al­legedly) pure chance such as roulette, slots, or jack­pots or lotto. - Gachapon/Blind Box sets are also not strictly es­ports re­lated, but have be­come ubiq­ui­tous in the gam­ing land­scape as of late, and are also of­ten the only type of gam­bling that is built di­rectly into games. Cus­tomers open ‘crates’ or sim­i­lar pack­ages which con­tain in-game items of vary­ing lev­els of rar­ity, of­ten pay­ing per ‘draw’ – ei­ther in in-game cur­rency or time, or via mi­cro­trans­ac­tions.

As prac­ti­cally all es­ports re­lated gam­bling takes place via the in­ter­net, the rel­e­vant Aus­tralian Fed­eral leg­is­la­tion is the In­ter­ac­tive Gam­bling Act 2001 (‘IGA’). Vary­ing State and Ter­ri­to­ries leg­is­la­tion tech­ni­cally cover over-the-counter or phone bet­ting, but it’s largely ir­rel­e­vant to es­ports at present. No­tably, the IGA is provider-fo­cused; in­di­vid­u­als en­gag­ing in on­line bet­ting or gam­bling aren’t com­mit­ting of­fences.

The IGA pro­hibits both pro­vid­ing and ad­ver­tis­ing ‘in­ter­ac­tive gam­bling ser­vices’, which is de­fined as ‘games of chance, or mixed skill and chance played for money or items of value over a car­riage ser­vice’, the car­riage ser­vice in this in­stance be­ing the in­ter­net. How­ever, there is an ex­plicit ex­emp­tion for ‘ex­cluded wa­ger­ing ser­vices’ on a num­ber of types of events, in­clud­ing sport­ing events and a mis­cel­la­neous ex­emp­tion. In other words: you can’t run casino games on­line, but you can still run a bet­ting ser­vice like the TAB.

As the leg­is­la­tion was crafted long be­fore the rise of Face­book, let alone es­ports, many ques­tions re­main as to its real-world ap­pli­ca­tion. On the face of it, it would seem that wa­ger­ing on es­ports events is per­mis­si­ble while ev­ery­thing else men­tioned

above is not. But ques­tions re­main. Is es­ports a ‘sports event’ for wa­ger­ing pur­poses, thus gain­ing cer­tain rights and re­spon­si­bil­i­ties avail­able to of­fi­cial sports? Are vir­tual skins ‘items of value’, given the fact that they only hold value within the Steam economy or on the black mar­ket and can’t of­fi­cially be cashed out? And al­though the Depart­ment of Com­mu­ni­ca­tion and the Arts says com­puter games are re­garded as games of skill, what about in-game blind box draws – are they games of chance and thus im­per­mis­si­ble un­der the IGA, de­spite their mas­sive and still-grow­ing pop­u­lar­ity?

These kinds of ques­tions will only be more defini­tively an­swered by the courts when some­one raises a case that ad­dresses them, or more ac­cu­rate leg­is­la­tion crafted specif­i­cally for es­ports is en­acted. In the mean­time, pub­lish­ers, es­ports leagues, book­mak­ers and pun­ters are left to in­ter­pret from the IGA – leg­is­la­tion which Xenophon has said “may as well be 150 years old in terms of deal­ing with these is­sues.”

THE HOUSE AL­WAYS WINS

One of the rea­sons the sit­u­a­tion re­mains so uncer­tain is that, to a large ex­tent, game pub­lish­ers don’t like to as­so­ciate them­selves with gam­bling in any way. Valve, for in­stance, has re­cently re­sponded to a Washington State Gam­bling Com­mis­sion inquiry by deny­ing any in­volve­ment what­so­ever in gam­bling, the pro­mo­tion of gam­bling, or ‘fa­cil­i­tat­ing’ gam­bling. “A lot of game pub­lish­ers have a nat­u­ral an­tipa­thy to gam­bling,” says Ian Smith, In­tegrity Com­mis­sioner of the es­ports In­tegrity Coali­tion. “They don’t like it, they don’t want it. But bet­ting will oc­cur, so what we have to do is be re­al­is­tic and prag­matic about it."

"With on­line ac­cess, you can have an on­line liq­uid­ity pool, which al­lows for sin­gle events to draw on peo­ple from all over the world, al­low­ing a bet­ting mar­ket to be prof­itable,” ex­plains Dr Sally Gains­bury, an in­ter­net gam­bling re­searcher at the Univer­sity of Syd­ney. “The gam­bling com­pa­nies have re­alised this op­por­tu­nity and be­gun of­fer­ing mar­kets on es­ports at a pro level.”

The largest wa­ger­ing providers on­line are tra­di­tional book­ies mov­ing into the field like Bet 365, Uni­Bet, and Sports­bet, as well as more ded­i­cated es­ports book­ies like Pin­na­cle and Unikrn (op­er­at­ing in as­so­ci­a­tion lo­cally with TabCorp). But smaller op­er­a­tors pro­vid­ing tech­ni­cally-pro­hib­ited casino game bet­ting also ex­ist, and with them comes a larger

po­ten­tial for cor­rup­tion.

In early July, the CS:GO scene was rocked by rev­e­la­tions that pop­u­lar stream­ers Trevor ‘TmarTn’ Martin and Tom ‘ProSyn­di­cate’ Cas­sell were key staff in a site called CSGO Lotto, pro­mot­ing the jack­pot ser­vice to their on­line fol­low­ing of around ten mil­lion sub­scribers with­out dis­clos­ing their own in­volve­ment in it. Oth­ers were ex­posed, or con­fessed to, gam­bling on-stream us­ing site-pro­vided skins – ef­fec­tively house money – in re­turn for ex­po­sure and pay­ment. The site CSGO Di­a­monds, mean­while, ad­mit­ted to shar­ing in­side in­for­ma­tion with no­table streamer Moe ‘mOE’ As­sad to in­flate his on-stream win per­cent­ages at their casino games, mainly as a pro­mo­tional tool.

Since then, Valve has sent cease­and-de­sist let­ters to a num­ber of web­sites util­is­ing the Steam pub­lic API for gam­bling pur­poses, with most of them ceas­ing op­er­a­tion shortly there­after. None­the­less, a quick search brings up a num­ber of newer sites that have sprung up to fill the vac­uum left by their ab­sence.

“Given that they’re not reg­u­lated, [these sites] are un­likely to have any con­sumer pro­tec­tion mea­sures built into them,” says Dr Gains­bury. “There’re no lim­its, there’re no warn­ing signs. And there’s noth­ing to stop sites just flee­ing into the night and tak­ing the vir­tual ac­counts and items with them.”

An­other spec­tre raised by the in­tru­sion of gam­bling into es­ports is match-fix­ing. “Most stake­hold­ers in es­ports are ig­no­rant of the threat,” says Smith, who prior to his en­try into es­ports worked as a lawyer for over twenty years in re­la­tion to cricket and in­tegrity. “Out­side of Korea, what’s hap­pened? iBUYPOWER, Episilon [E-sports]… Mickey Mouse-level cases, op­por­tunis­tic stuff, a cou­ple of hun­dred bucks here and there.

“But the prob­lems that have oc­curred in cricket, in rugby, in football, they’re all com­ing, and it’s sim­ply a mat­ter of time. There’s only one way this ends, with­out reg­u­la­tion – in a scan­dal.”

THE YOUNG ROLL DICE

Xenophon’s pri­mary charge against es­ports and videogame gam­bling is the nat­u­ral po­ten­tial of videogames to lead to un­der­age gam­bling, telling TripleJ in Au­gust that there was a real risk that young peo­ple could de­velop gam­bling prob­lems. Rahul Sood, CEO and co-founder of the afore­men­tioned Unikrn, au­thored a blog post last April con­tem­plat­ing the is­sue. “When my 13-year-old son and his friends talk about skins bet­ting it

THE PROB­LEMS THAT HAVE OC­CURRED IN CRICKET, IN RUGBY, IN FOOTBALL, THEY’RE ALL COM­ING, AND IT'S SIM­PLY A MAT­TER OF TIME

made me se­ri­ously un­com­fort­able,” he wrote. “Re­spon­si­ble and safe gam­bling should be [le­git­i­mate op­er­a­tors’] top pri­or­ity. Un­der­age gam­bling is a com­plete non-starter and should be shut down.” “Un­der­age gam­bling is a huge prob­lem,” Sk­inXChange.com lead de­vel­oper Justin Carl­son told Bloomberg back in Septem­ber 2015, say­ing that many chil­dren were tak­ing their par­ent’s credit cards with­out their knowl­edge and us­ing them to wa­ger skins. “[They of­ten] rack up hun­dreds or thou­sands of dol­lars in skins, only to lose them all on some bet­ting or jack­pot site.” Be­sides gam­ing’s in­her­ent ap­peal to younger au­di­ences, the gen­eral lack of age­gat­ing on un­reg­u­lated sites and the wide­spread use of vir­tual items as to­kens is a prob­lem when it comes to stop­ping un­der­age users. “[Vir­tual items have] re­ally changed the way peo­ple en­gage with bet­ting,” says Dr Gains­bury. “You don’t have to use real credit cards or ac­counts which may have age lim­its or ver­i­fi­ca­tions on them.”

She also points out that as­sess­ing the value on vir­tual items is a step re­moved from sim­ply bet­ting money, mak­ing it dif­fi­cult to as­sess the ac­tual worth of wa­gers. “There’s also the fact that these kinds of things may in­tro­duce gam­bling to peo­ple who other­wise might not have been in­tro­duced to that ac­tiv­ity,” she adds.

Cer­tainly, fa­mil­iar­ity by ex­po­sure has al­ways been re­garded as a par­tic­u­larly in­sid­i­ous con­cept – wit­ness candy cig­a­rettes, banned un­der State and Ter­ri­to­ries leg­is­la­tion since 1999 due to its ob­vi­ous links to the to­bacco in­dus­try. In a pa­per pre­pared for the Vic­to­rian Re­spon­si­ble Gam­bling Foun­da­tion, Dr Gains­bury also points out that re­peat ex­po­sure – even in cases where no real money is in­volved – may none­the­less en­cour­age view­ing of gam­bling as an ac­cept­able, ev­ery­day ac­tiv­ity, though she stresses that this has not yet been tested em­pir­i­cally.

In the mean­time, a Class-Action Law­suit against Valve (and CSGO Lotto) which al­leged that Valve know­ingly ‘al­lowed an il­le­gal on­line gam­bling mar­ket’ to ‘take money from teenage cus­tomers’ was dis­missed in early Oc­to­ber on ju­ris­dic­tional grounds. The case may be re-opened on ap­peal, but for now, it ap­pears as though the courts have no for­mal opin­ion on the mat­ter.

FRAGGED

A dif­fi­culty in the reg­u­la­tion of es­ports and es­ports wa­ger­ing is the nat­u­ral frag­men­ta­tion of the mar­ket be­tween the var­i­ous dif­fer­ent games and leagues. League of Leg­ends is dif­fer­ent to CS:GO is dif­fer­ent to DOTA 2 is dif­fer­ent to Star­craft or SMITE – not to men­tion the plethora of in­di­vid­ual as­so­ci­a­tions like ESL Pro League, Es­ports Cham­pi­onship Se­ries, the up­com­ing Pro­fes­sional es­ports As­so­ci­a­tion and so on.

“Ev­ery other sport has some­one at the cen­tre,” ex­plains Smith, who says the lack of cen­tral­i­sa­tion is a ma­jor prob­lem prevent­ing fur­ther growth of spon­sor­ship and ad­ver­tis­ing for the in­dus­try. “If you wanted to buy spon­sor­ship of the World Cup, you’d go to FIFA and you’d buy it. If you

WE SHOULD DO SOME­THING BE­FORE WE GET SOME­THING IM­POSED ON US BY PEO­PLE WHO DON’T UN­DER­STAND OUR IN­DUS­TRY OR OUR GAMES

want to in­vest in an es­port, you have to go to 20 dif­fer­ent places with dif­fer­ent coun­tries, dif­fer­ent needs, dif­fer­ent abil­i­ties…”

“I don’t ever see a coali­tion of Bliz­zard, Valve, Riot, and Hi-Rez get­ting to­gether and de­cid­ing there’s go­ing to be a cen­tral point,” he con­tin­ues. “But they might just buy into some­one else’s idea of this, if there was a dom­i­nant over­all provider on the scene.”

The lack of a cen­tral au­thor­ity also has im­pli­ca­tions for dif­fi­cul­ties re­gard­ing reg­u­la­tion – not just in in­tegrity, but also in a plethora of other ar­eas in­clud­ing con­tracts, dis­pute res­o­lu­tion, and em­ployee rights. But Smith is fo­cused on the in­tegrity side of the pic­ture. “It’s scary for these topend Olympics, World Cup level brands that have been hit by dop­ing scan­dals, match-fix­ing scan­dals, cor­rup­tion, sex­ual as­saults and so on – they’re ter­ri­fied, and quite rightly so, of po­ten­tial as­so­ci­a­tions,” he ex­plains. “But they know that in tra­di­tional sports, at least, there’s reg­u­la­tions and sys­tems that are at least try­ing to deal with it. There’s a de­gree of brand con­trol they can rely on.”

“Say Pana­sonic goes to a league and asks them what they would do if there was a match fix­ing scan­dal. They’d ban the play­ers. Well, it’s not just a question of how you would re­act – but also what you are ac­tively, proac­tively try­ing to do to try and stop it from hap­pen­ing. And the an­swer is still, across large parts of the in­dus­try, ab­so­lutely noth­ing.”

ALL BETS ARE OFF

Dr Gains­bury be­lieves that in­dus­try self-reg­u­la­tion will be the first to move, pri­mar­ily be­cause other­wise it will hurt the in­dus­try’s rep­u­ta­tion and, ul­ti­mately, bot­tom line. “An­nual com­pet­i­tive events and prize pools have al­most dou­bled since 2012, so when you’re cross­ing that size, it’s go­ing to have to be­come le­git­i­mate,” she says. “Peo­ple won’t bet if they don’t think it’s le­git­i­mate. So there’ll have to be an in­dus­try body or­gan­is­ing it all, with reg­u­la­tion to mon­i­tor the events and play­ers, just to make sure what con­sumers are bet­ting on is both a le­git­i­mate and fair event.”

Smith, mean­while, warns that gov­ern­ment reg­u­la­tion will step in if the in­dus­try does not. “Ma­jor scan­dals al­ways bring the politi­cians out, par­tic­u­larly in sports – it’s a sexy area, it gets the votes, it gets at­ten­tion. So I have no doubt if some­thing hap­pens in es­ports, and we’ve seen this in South Korea al­ready, the rel­e­vant gov­ern­ment de­part­ments would be all over it.

“If the in­dus­try had any wis­dom at all, they’d say that we should do some­thing about this be­fore we get some­thing im­posed on us by peo­ple who don’t un­der­stand our in­dus­try, our game, and our sport,” con­tin­ues Smith. “It’s ab­so­lutely in­evitable in my view that reg­u­la­tion will be im­posed, un­less the in­dus­try con­vinces the politi­cians and the var­i­ous gam­bling com­mis­sions that they are act­ing proac­tively, and in the best in­ter­ests of the broad pub­lic and the play­ers.”

Cer­tainly Xenophon, de­spite his many valid points about the glar­ing in­ad­e­qua­cies of our cur­rent gam­bling leg­is­la­tion, gives no in­di­ca­tion that he re­ally un­der­stands es­ports, or even just videogames more gen­er­ally. “Mario Kart is a fan­tas­tic game that many mil­lions of peo­ple around the world have en­joyed, but there are le­git­i­mate ques­tions to ask about a kid’s game be­ing used as a ve­hi­cle for on­line book­mak­ers and gam­blers,” he said in a some­what bizarre press re­lease at­tempt­ing to link a le­git­i­mate, Mario Kart tour­na­ment held in Adelaide with es­ports wa­ger­ing. Imag­ine the headaches ig­no­rance of this sort would pro­voke if ex­pressed in bind­ing leg­is­la­tion. It's ob­vi­ous that the in­dus­try can no longer af­ford to be com­pla­cent.

“If the in­dus­try doesn’t re­act,” warns Smith, “then oth­ers will re­act for them.”

--

Sen­a­tor Xenophon was ap­proached for com­ment but did not re­spond by time of writ­ing. Many thanks to Nick Com­mins of Mac­quarie Univer­sity and Christo­pher Chin, Lawyer at Mills Oak­ley for their help and ad­vice.

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